It is reported that there is no space for blind optimism for China"s steel market in 2009. Even the most optimistic industry analysts now make forecasts cautiously that output and apparent consumption of crude steel will grow 1% and 5% respectively. This is the most optimistic forecast for this year.
As per report, though domestic steel price tends to stabilize after the New Year"s Day and some steelmakers rush to restart productions, many insiders believes the market is still under correction despite short-live ups and downs. Both the government and industry analysts agree current difficulties such as dull demand and huge stockpiles can be basically eased in the first quarter or the first half of this year at the earliest.
According to Mr Jia Yinsong, an official from Ministry of Industry and Information Technology, steel sector now faces at least four difficulties:
1. Output growth slumps amid wide-range production cutbacks. Average daily output in early November dropped over 31% from June.
2. Steel price plummets and the industry reports overall losses. Largest price downswings for 6.5mm wire rod and 2.75mm HRC exceed 40%. Loss rate reached 59% in last October and rose further in days later.
3. Steel stock swells significantly, worsening financial situation. Accounts receivable outstanding and accounts payable outstanding reported by major steelmakers increased 42.6% and 50.1% respectively in last October.
4. Due to high iron ore prices, steelmakers" costs now stay higher than prices.
Mr Jia Liangqun chief analyst with Mysteel said that it would indeed take some time to consume high-price iron ore and finished products stocks. But bigger problem lies in that high speed industry development for at least eight years has led to inertia for most steelmakers, which disables their adaptability to sudden market changes. It is impossible to remove the inertia and reestablish fresh market sense and sales modes in a short time. She said that that current price stabilization could not last long and only implies prices are unlikely to fall dramatically again.
Mysteel has forecasted that 2009 steel market will be characterized with high capacity, low output and dull demand.